Global bond investors reminded Prime Minister Keir Starmer of a harsh truth of British politics: The market’s verdict can be swift and punishing. Last week, Starmer’s ruling Labour Party experienced a face-saving mission after its Members of Parliament forced it to scrap £5 billion worth of cuts to welfare spending on Tuesday evening, making it even harder for Chancellor of the Exchequer Rachel Reeves to tame the government’s budget deficit. As we saw with Trump this year, politicians pay little attention to the short-term gyrations in the stock market, but the bond market is a whole new ball game. Stocks slid, yields rose, and the pound tumbled as investors headed for the exits, sceptical of Starmer’s continued commitment to shoring up the nation’s precarious finances. The UK is currently in dire straits, with Chancellor Rachel Reeves struggling for support from her party.
- The UK 10-Year Gilts could test 5% in 2025 as the government wrestles with consumer confidence – from an investment perspective, we feel the country should be avoided for a while.
